5 Essentials for Managing IT Contracts

5 Essentials for Managing IT Contracts

It can take enormous effort to get an IT Contract negotiated, agreed and signed off by all parties. So perhaps it is not surprising that many organisations – both customers and suppliers – have a tendency to congratulate themselves on their achievement; breathe a sigh of relief; and stick the documents in a drawer until it is time for renewal or until they hit problems.

Is it any wonder then that a recent survey indicates that more than 30% of clients are dissatisfied with their Service Provider’s performance? Whilst not all of the issues could be avoided, many could if the signed Service Contracts were correctly managed, and then subject to an annual health-check.

Of course, the team that negotiated the contract are unlikely to be the same people responsible for its execution and on-going operation. That means there is ample room for things to “drop between the cracks” if the handover from sales to contract management and operations is not performed quickly, comprehensively and accurately. IT contract management in particular is a much neglected expertise – and yet can be the difference between success and failure of the contract; the difference between a mutually beneficial service relationship and the type of service dissatisfaction that we read about so often.

In a previous article, we looked at major pitfalls to watch out for in IT Service Contracts. If your contract is already signed,as a starter, here are 5 essentials that could help make your IT Contract a shining example of success:

#1 Success Reward: If you have an incentive scheme for sales (suppliers) or savings (customers), ensure that payments are made over the life of the contract and only if it is achieving the targets on which the signing approval was based. [There is a famous legend of a salesman who collected his very large "win" bonus and departed an IT service company just after a major contract was signed - before anyone realised how costly that agreement was going to be to both the supplier and the customer.]

#2 Continuity: It is absolutely best for the people who are going to manage and execute the contract to be involved in the negotiations (at least in the latter stages). However, whether or not that does happen, the negotiators must document (in everyday language) and handover in a series of internal briefings,

  • what has been agreed, especially in terms of the scope of the contract;
  • what are the planned and expected success measures;
  • what decisions/actions have been left incomplete;
  • what out of the ordinary elements or restrictions are included in the contract;
  • what other agreement or negotiations have been associated with the contract;
  • what commitments, timeframes, milestones, deliverables have been agreed or scheduled.

#3 Governance: How is this contract going to be controlled, managed, and monitored during its operational term? It is almost impossible to stress the important of Governance (and how frequently it is overlooked or neglected). Ideally this should have been agreed as part of the contract itself, but if not the framework and personnel need to be in place as quickly as possible after signing and well before the contracted activities commence. Governance is not limited to meetings (which should be short and focused). Many Governance elements must also be clear to all parties including for example,

  • who is performing what role and what are the boundaries of their responsibilities and decision making authority;
  • how disputes are to be handled and what is the stage by stage mechanism for resolving such matters before senior executives become involved and without going to the Law;
  • what reports are being produced when, and who receives them – always ensuring that the level of detail is appropriate to the recipient;
  • how are changes to be handled and implemented – at both the operational level and the financial/contract document level;
  • how the customer satisfaction level will be measured and made known;
  • how are identified risks being mitigated and how is such risk reduction being monitored;
  • how innovations, savings, and initiatives will be introduced and considered – and are such activities a regular commitment within the contract.

#4 Contract Calendar: This is the simplest and most under-used tool in the contract management armoury. One of the first activities for an IT contract manager is to set up a diary system containing all the dates agreed for activities, deliverables, milestones, reports, meetings, invoicing/payments, cancellation periods, notification deadlines, renewals, etc. Of course, simply having the calendar is not much good if it is forgotten or ignored, so automatic reminders are essential not just to a single person (who may be on holiday, sick, or even left the company).

#5 Annual Health-Check: If you don’t check the contract performance you will never know whether it is successful or not. Whether that check is performed internally or using external expertise, it should be independent of the daily contract management and operations and should certainly cover such aspects as Financial Performance, Operational Performance and Contract Performance. It may be true that “if it ain’t broke, don’t fix it” but for IT contracts “you need to know if it’s broke” then you can fix it before it’s too late.

Of course, there is much more to IT Contract Management than can be easily fitted into an article of this size. So the above are only pointers to help people get started and focus on the most important aspects to ensure they have those essentials in place as quickly as possible.

Source: EzineArticles
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